Impressive rally in stocks following hawkish Fed!

Given FOMC stance, was expecting more selling - market proved me wrong today.

A number of the growth stocks which were down by 50-70% over past month rallied hard...has market discounted the worst?

On watch for base building.
Still of the view that before this cycle ends, we will see 15-20% pullback in the indices from their ATHs....

However, with most growth stocks already bombed out (down 50-70%) from their ATHs, perhaps they will now base out as indices roll over?

This game isn't easy!
Intellectual honesty more important to me than ego.

Today's price action (especially in growth stocks) was impressive! During '00-'03 bust, TMT stocks declined by 50-80% in 3 years, in this cycle many declined by 40-70% in a few months!

On watch to see if they build bases now..
In the investment business, the market's reaction is more important than the news!

When stocks stop declining (and rally) on bad news, it is worth paying attention...growth stocks were pummelled over past few months, lets see if they now start basing out....time will tell.

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with Puru Saxena

Puru Saxena Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @saxena_puru

16 Dec
Update -

With central bank intervention/QE, asset markets have become prone to massive booms and busts.

Algos + online trading have made the markets super fast and now, big moves happen very quickly.

10 or 20 years ago, stocks used to decline 40-50% in a year or two and....
....now, they go down this much (and more) within weeks! In Nov '21, when Fed announced QE taper, many high growth stocks tanked by 40-70% within 6 weeks and during this period, my hedging strategy did not offer me full protection.

My high growth stocks declined more than the...
...ARK ETFs and in order to protect my capital, I sold all my stocks and to profit from the intense selling, also went net short.

Going forwards, when the tide of liquidity goes out again, instead of remaining invested and hedging, I may (once again) sell all stocks and...
Read 4 tweets
13 Dec
This QE cycle was massive (bigger than the previous rounds) and its unwind is likely to be quicker (4-5 months). Equity valuations are also a lot higher today!

Many expecting a year-end rally but $NDX peaked over 3 weeks ago and recent bounce failed well below ATH...
Anything can happen but it looks increasingly likely that the carnage is now spreading to the indices.

The risk/reward over the following weeks is unfavourable, stocks likely to be lower in 2022 before Fed comes to the rescue again.

The Fed will help but only after more pain.
Fairly obvious that we were in a QE-induced bubble.

In my interview last year (July 2020) with @Matt_Cochrane7 , I clearly mentioned that we were in an 'incipient bubble' which was likely to blow into a full fledged mania before the bust.

When liquidity shrinks, bubbles pop.
Read 5 tweets
8 Dec
Indices still near ATHs but big drawdowns in growth stocks!

$AFRM -45% $CRWD-32% $DLO -60% $FVRR - 65% $GLBE -43% $LILM -60% $LSPD -65% $MELI -49% $MQ -60% $OKTA -34% $PATH -54% $ROKU -60%
$S -45% $SE -37% $TWLO -48% $UPST -60%

Buying over next 6-8 weeks = decent 5-yr IRR?
If the CPI print stays elevated and the Fed tightens rapidly, stocks likely to come under pressure over the next 2-3 months.

However, with massive drawdowns in growth stocks already behind us, weekly buying over next 2-3 months should reduce anxiety and deliver decent 5-yr IRR.
The indices not telling the story but November was a brutal month for high growth stocks!

ARK ETFs declined ~30% and many growth names tanked 40-60% in ONE MONTH!!

Markets are becoming super fast; the discounting machine is becoming more efficient.
Read 4 tweets
7 Dec
$ARKK - That was quick!

Big relief rally in two days....
The rally *might* continue to $104 area to suck in more longs but high odds it will roll over and at the very least test recent lows.

If CPI print is hot and Fed cuts back QE sooner, then very high odds we'll break yesterday's low.

Watching and stalking for another short.
After I covered my ARK shorts at the open yesterday and posted in real-time, the usual trolls chirped again.

Today, ARK ETFs are +5% - didn't it make sense to cover short positions near the open yesterday?

Bear-markets don't go down in a straight line; there are sharp rallies!
Read 4 tweets
7 Dec
After recent carnage, forward EV/revenue multiples for some high-growth ecommerce, fintech and software companies have almost reverted to their pre-COVID highs.

These stocks likely to remain volatile over near term, but should hand out decent returns over the next 4-5 years.
Gradual scaling into these stocks over the following couple of months likely to deliver good long-term IRR.

Those companies which are still richly valued remain vulnerable to multiple compression (due to tight Fed), so the risk/reward in those stocks is still unfavourable.
Bear-markets don't go down in a straight line, they are interrupted by sharp relief rallies.

In Nov, ARK ETFs declined by ~30% and after Monday's panic open, I covered my short positions. After relief rally, will short again.

Still feel risk assets will deflate for few weeks.
Read 4 tweets
5 Dec
Update on the "open offer" -

The wager ($1m-$5m) to get my returns verified has now been available for ~24 hours and so far, none of the haters have come forward and put their money on the table.

These cowards can only hide behind anonymous accounts + slander others. Pathetic!
The haters were criticising me when I was holding some of the strongest stocks during QE.

Now, they are moaning because I've sold out of all my stocks during the post-QE deflation.

My hedges weren't functioning properly so in order to protect my capital, I raised cash...
What else was I supposed to do? Remain invested like a sitting duck and get killed?

Remember, stocks do not triple/quadruple in 12-18 months and here my entire portfolio went up by ~500% since March '20.

These returns are NOT normal, so with the QE-bust underway, I cashed out.
Read 4 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!

Ethereum

0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy

Bitcoin

3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us on Twitter!

:(